April 30, 2010

NEW PENALTY POLICIES FOR OSHA WILL RESULT IN INCREASED PENALTIES FOR EMPLOYERS

On April 22, 2010, Dr. David Michaels, Assistant Secretary of Labor for the Occupational Safety and Health Administration, issued a memorandum to all Regional Administrators regarding “administrative enhancements” to OSHA’s penalty policies.The administrative enhancements will become effective over the next several months.Dr. Michaels estimates that the average penalty for a serious violation will increase from approximately $1,000 to an average of $3,000 to $4,000.These changes are establishing general agency policy and do not preclude the agency from assessing a different penalty where appropriate.The changes include:

•The time period for considering an employer’s history of violations will expand from three years to five years.An employer who has been inspected by OSHA within the previous five years, and has no serious, willful, repeat, or failure to abate violations, will receive a 10% reduction for history.On the other hand, an employer that has been cited by OSHA for any high gravity, serious, willful, repeat, or failure to abate violation within the previous five years will receive a 10% increase in its penalties up to the statutory maximum.

•The time period for repeat violations will be increased from three years to five years.

•Area Directors are authorized to offer up to a 30% penalty reduction to employers at an informal conference.Any reduction over 30% will have to be approved by the Regional Administrator.Area Directors will also be authorized to offer an employer with 250 or fewer employees an additional 20% reduction if that employer agrees to retain an outside safety and health consultant.

•High gravity, serious violations related to the standards identified in the recent Severe Violator Enforcement Program (“SVEP”) will no longer need to be grouped or combined but can be cited as separate violations, each with its own proposed penalty.

•OSHA will be adopting a gravity-based penalty determination that provides for a gravity-based penalty between $3,000 and $5,000.

•OSHA is adopting a new penalty reduction structure for the size of the employer.Penalty reductions are available for employers with less than 250 employees.No size reduction will be applied for employers with 251 or more employees.

•The 15% “quick fix reduction,” which is allowed as an abatement incentive program meant to encourage employers to immediately abate hazards found during an inspection, will be retained. However, the 10% reduction for employers with a Strategic Partnership Agreement will be eliminated.

•The minimum proposed penalty for a serious violation will be increased to $500.

•Final penalties will be calculated serially, unlike the present practice in which all of the penalty reductions are added and then the total percentage is multiplied by the gravity-based penalty to arrive at the proposed penalty.For example, the penalty adjustment factors are applied in the order of history, good faith, quick fix, and size.The reductions are taken separately instead of being summed together for one overall penalty reduction.This change can result in a penalty increase of approximately 50%.

Sample Data

Summed

Serially

High/Lesser

$5,000

$5,000

History (10%)

$4,500 – 10%

Good Faith (15%)

$3,825 – 15%

Quick Fix (15%)

$3,251 – 15%

Size (30%)

10% + 15% + 15% + 30% = 70%

$2,275 – 30%

Result

$1,500

$2,275

No proposed penalty can exceed the statutory limits as such change would require rulemaking.However, these policy changes can increase current proposed penalties by almost 50% for all violations being issued.For more information on the penalty policy, visit http://www.osha.gov/dep/penalty-change-memo.pdf.

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